“Labour’s own Tax Working Group led by former Finance Minister Michael Cullen showed that only 30 per cent of the benefit from removing GST from fruit and vegetables will be passed through to consumers in the form of lower prices, with supermarkets keeping the rest. That means the average New Zealander will be just 57 cents better off each week”, says ACT Leader David Seymour.
“Labour says removing GST from fruit and vegetables will cost $515 million a year. If only 30 per cent of the benefit is passed through to consumer prices, that’s a $154.5 million reduction in the price of fruit and vegetables. Spread over 5.2 million people, the average person will see a benefit of just $29.70 a year, or 57 cents a week.
“The Tax Working Group examined whether GST exemptions for certain goods would be passed on to consumers. After examining research that considered 191 reductions in value-added tax rates for specific items, it concluded:
“In 2010, Finland reduced the VAT rate on restaurant and catering services from 22 per cent to 13 per cent. Only 31 per cent of the rate cut was passed through to consumer prices and the amount of reduction was highly variable among restaurants.
“In 2010, the VAT rate on hotels, guesthouses and campsites in Germany was reduced from 19 per cent to 7 per cent. Only 28.4 per cent of the rate cut was passed through to consumer prices.
“In 2009, France reduced the VAT rate on restaurant services from 19.6 per cent to 5.5 per cent. Only 45 per cent of the rate cut was passed through to consumer prices.
“The upshot is that there are much more effective ways of helping New Zealanders with the cost of living crisis, including by providing income tax cuts funding by reductions in wasteful spending, as ACT has outlined in our fully costed alternative budget.
“This policy an act of desperation from a visionless, poll-driven party. Labour is out of ideas, out of Ministers, and out of money.
“Labour knows the policy doesn’t work because Grant Robertson said so just a few months ago.
“Labour, the Greens, and the Māori Party would destroy the tax system, the economy, and drive away anyone with ambition.
“Labour going all in on GST meddling sets up an election between parties with serious ideas to improve economic policy, and parties with vote buying gimmicks who are also the ones that got us into this mess”.